The Global Games Market Will Reach $108.9 Billion in 2017 With Mobile Taking 42%

Today, Newzoo released the latest quarterly update of its Global Games Market Report. It shows that 2.2 billion gamers across the globe are expected to generate $108.9 billion in game revenues in 2017. This represents an increase of $7.8 billion, or 7.8%, from the year before. Digital game revenues will account for $94.4 billion or 87% of the global market. Mobile is the most lucrative segment, with smartphone and tablet gaming growing 19% year over year to $46.1 billion, claiming 42% of the market. In 2020, mobile gaming will represent just more than half of the total games market. The PC and console game markets will generate $29.4 billion and $33.5 billion in 2017, respectively.

Asia-Pacific is by far the largest region, with China expected to generate $27.5 billion, or one-quarter of all revenues in 2017. Newzoo expects the global market to grow at a CAGR of +6.2% toward 2020 to reach $128.5 billion. Based on its review of final 2016 financial results of more than 70 public companies, Newzoo also upped its final take on 2016 by $1.1 billion to $101.1 billion. Mobile games performed even better than expected, especially in China, while the PC games market performed worse than anticipated in Newzoo’s previous quarterly update. You can see how the top 25 public game companies performed in 2016 here.

Mobile revenues on the rise as Chinese giants continue to grow

Mobile gaming will generate $46.1 billion this year, or 42% of all global game revenues. More than three-quarters of this, or $35.3 billion, will come from smartphone gaming, with tablet games accounting for the remaining $10.8 billion. Tablet unit sales have plummeted over the years, but with 280 million tablets used actively, the segment contributes significantly to the success of mobile games. The console gaming segment performed better than expected in 2016 thanks to console manufacturers, publishers, and consumers embracing of a variety of digital business models. Microsoft and Sony generated more than $14 billion in combined revenues from first-party games, third-party game fees, and subscription revenues. In 2017, we expect console gaming to generate a total of $33.5 billion in revenues worldwide, of which 65.8% digital.

Revenues for both PC gaming segments are anticipated to drop slightly in the coming year. PC browser revenues have been decreasing since 2015 because of the transition of casual gaming to mobile devices. In 2016, Facebook’s revenues from gaming were at its lowest since 2011, while Zynga’s PC revenues dropped more than 30%. Newzoo expects the segment to generate $4.5 billion in 2017, a year-on-year decrease of 9.3%. Our full-year revenue analysis showed that PC revenues of public companies decreased in both Western and Asian markets last year, while emerging markets had single-digit growth rates. This decrease also has a significant impact on our longer-term forecasts. We now expect downloaded/boxed PC games to reach $24.5 billion in 2019, a significant adjustment downward compared to the $29.0 billion global figure for the PC games market in our January update.

China to generate one-quarter of game revenues worldwide

The APAC territories will generate $51.2 billion this year, or 47% of total global game revenues. This growth represents a 9.2% year-on-year increase. China alone will take one-quarter of all global game revenues, reaching $27.5 billion this year, well ahead of the U.S., which is estimated to reach $25.1 billion. Most of China’s growth will come from mobile gaming, with Tencent and NetEase leading the way. Mobile gaming revenues from these two companies alone reached $7.7 billion in 2016. As a result, we increased our previous 2016 mobile revenue estimates for China from $10.0 billion to $11.2 billion. We expect growth to continue toward $14.6 billion in 2017 for China alone. The fastest-growing region in the coming years will be Rest of Asia (without China, Japan, and Korea), with total game revenues growing to $10.5 billion in 2020, up from $4.5 billion last year.

North America is the second-largest region, with estimated revenues of $27.0 billion in 2017, a year-on-year increase of 4.0%. Most of this growth will come from smartphone gaming, a mature market, but certainly not saturated. Growth is fueled by a combination of a higher share of spenders as well as average spend per paying gamer. We see the same trend in EMEA, which we expect to reach $26.2 billion in 2017. Latin America will grow to $4.4. billion in game revenues this year.

Newzoo adjusts high-level market segmentation

With the games market constantly evolving, we felt that it was necessary to update our segmentation to better suit the current market. We renamed the segments of casual webgames and PC/MMO games to browser PC games and downloaded/boxed PC games, respectively. Furthermore, we decided to merge handheld console gaming and TV console gaming into one console segment. Although the sales of handheld games saw a minor boost in 2016, mostly driven by the success of Nintendo 3DS Pokémon games, we believe that the segment will become increasingly insignificant. The decision was also based on the launch of the Nintendo Switch, which is a hybrid console rather than a solely handheld or TV console. After these adjustments, our new segmentation consists of the following segments: browser PC games, downloaded/boxed PC games, (smart)phone games, tablet games, and console games.

Global games market forecasting methodology

Newzoo’s Global Games Market Forecast Model projects gamer numbers and revenues per segment, region, and screen on a global, regional, and country level. It also shows the share of paying gamers and average spend in the same granularity. These projections are analyzed in multiple ways, comparing year-on-year growth rates, market share, CAGRs, and absolute amounts in USD between the regions and segments, as well as the development of specific regions or segments in time. These projections are compared to available third-party sources on a local or global level. Given the pace of the developments in the games industry, Newzoo reviews its conclusions and assumptions every quarter, considering newly available data and insights. Before publication of any data, Newzoo also performs various validation checks, including comparison against historical internal data, comparison against market figures from alternative sources, and validation from several Newzoo clients.

Newzoo’s Global Games Market Report is a subscription service that includes quarterly trend and forecasting update reports as well as continuous access to a dashboard with continuously updated gamer and game revenue forecasts by country and segment. The service is subscribed to by the majority of the world’s leading games, media, hardware and entertainment companies. Newzoo offers two similar services for Esports and Mobile.

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